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Joint sales promotion: An emerging marketing tool
Joint Sales Promotion: An
Emerging Marketing Tool
P. Rajan Varadarajan 43 P. Rajan Varadarajan is an assistant professor of marketing in the College of Business Administration at Texas A&M University.
Promoting your product jointly with another company's product may help your firm realize certain marketing goals.
C
onsider a few of the sales promotions in the U.S. consumer market in the last couple of
years. • Cents-off manufacturers' coupons redeemable on purchase of Dannon yogurt and Post Grapenut cereals. • A four-dollar cash and coupon refund offer on purchase of Minute Maid frozen orange juice concentrate, Ore Ida frozen hash brown potatoes, and Sara Lee frozen cake. • A free mail-in premium offer of Eveready lanterns on purchase of Good News disposable razors and Energizer batteries. • A free in-pack premium offer of Fisher dry roasted peanuts in cartons of Golden Grahams cereal. Although these promotions are marketing d i f f e r e n t products employing d i f f e r e n t sales promotion tools, all four promotions have one common trait. The brands participating in each of these promotions are manufactured by different companies. This phenomenon, commonly referred to as intercompany cooperative sales promotion, joint sales promotion, or tie-hi sales promotion, has been gaining momentum in recent years. ~
This article provides an overview of joint sales promotion. The first section outlines opportunities for sales and profit growth through joint sales promotion. The second section presents the results of a small survey on current practices, procedures, and policies pertaining to joint sales promotion. The final section is a brief discussion on the future of joint sales promotion. Potential Opportunities for Joint Sales Promotion
n a joint sales promotion, two or more distinct brand entities from different companies pool their promotional resources to capitalize on joint opportunities for sales growth and profits, or to realize other objectives. What characteristics make joint sales promotion possible? 1. Natural use complementary relationships. Joint sales promotions have been used extensively by firms to capitalize on complementary relationships in the natural use of certain products. For example, Reach toothbrush, a product of Johnson & Johnson, and Aqua-fresh toothpaste, a product of Beecham Inc., have been partners in numerous joint sales pro1. The terms intercompa~Lvcooperative sales promotion, joint sales promotion, and tie-in sales motion programs in recent years. promotion are used interchangeablyin this ar- Warner-Lambert Company and S. C. ticle. Johnson and Son, Inc., have been in-
I
Business Horizons / September-Oclol~er198.5
44
volved in joint promotion of Schick shaving cartridges and Edge shaving gel. Understandably, when the same firm manufactures two or more complementary products, it is likely to opt for an intracompany (umbrella) rather than an intercompany O'oint) sales promotion. A case in point: a sales promotion built around the Gillette Atra razor and Gillette Foamy shaving cream.
pantyhose. Two 50 cents-off store coupons, one for Diet Pepsi and the other for Pepsi Light, were inserted in five million packages of No Nonsense pantyhose. In addition, consumers were o f f e r e d a chance to obtain by mail a fi'ee pack of No Nonsense pantyhose in exchange for proofs of purchase of Diet Pepsi and Pepsi Light.
2. Newly created complementary relationships. Innovative firms con-
Products or services that together serve to satisfy a broader consumer need can be promoted jointly. Think of the possibilities inherent in the process of traveling to a particular vacation spot. We can hypothesize a promotion that proclaims, "Fly by Eastern Airlines! Rent an Avis Car! Stay at the Holiday lnn! Visit Walt Disney World/Epcot Center at Orlando, Florida! Just use your Ameri-
stanfly are engaged in identifying new uses for their products, which leads to creating complementary relationships. Joint sales promotion is one of the most effective means to help consumers learn about new uses for a product. For ,example, in order to promote the use of vinegar for periodic cleaning of automatic coffeemakers, H. J. Heinz C o m p a n y periodically inserts cents-off coupons for its vinegar in cartons of Mr. Coffee coffeemakers and filters. Manufacturers of breakfast cereals have long focused on promoting new uses, especially the use of cereals during other times of the day. General Foods Corporation, for example, actively promotes consumption of its Post Grapenut cereal mixed with yogurt, any time of the day. Dannon yogurt has been its partner in this sales promotion program for more than five years.
5. Process
complementarity.
can Express credit card to pay for all of the above, and get 20 percent off regular prices!"
6. Target market commonality. A joint sales promotion may be the ideal marketing tool to reach a particular target market that uses a number of noncompeting products. A case in point is a promotion that involves three products targeted at the children's market--Aim toothpaste, St. Joseph's aspirin, and Flintstone chewable vitamin tablets. 7. Seasonal demand patterns. Tylenol acetaminophen and Kleenex facial tissues have been jointly promoted on a number of occasions during the cold-flu season (the winter months), when use of both products reaches a high. Likewise, Reynolds Wrap, Hi-C fruit-flavored drink, and Kingsford charcoal are promoted jointly during
3. Use time complementarity. M a n u f a c t u r e r s of products commonly consumed at the breakfast table---cereals, orange.juice, pancakes, coffee, and so forth---often team together in sales promotions. Nabisco Inc., Nestle Company Inc., and the American Dairy Association jointly promote Nabisco Oreo cookies and Nestle Quik chocolate drink mix (dissolved in milk) as an ideal afternoon snack for children returning from school. Another illustration is a dinner-time meal concept built around Totino's frozen pizza, Sara Lee frozen cake, and Minute Maid fi'ozen orange juice concentrate. 4. Image complementarity, hnage rather than use can be the theme underlying a joint sales promotion program. A case in point is the joint sales promotion of Diet Pepsi and Pepsi Light soft drinks and No Nonsense
"Now, by mailing in your proof of purchase and the coupon attached to the mouthwash, you can get a substantial reduction on a swinging singles weekend package in Las Vegas."
Joint Sales Promotion: An Emerging Marketing Tool
"Newly introduced brands with limited market share can benefit by association with well-established brands in directly noncompeting product categories with a broad consumer base. Such association can enhance the image of the new brand and lower the risk consumers perceive in trying new brands." 45 the summer under the unifying theme "Summertime Cookout." 8. C o m m o n distribution patterns. In 1981, a major refund promotion tied together Gillette Good News disposable razors and Union Carbide Energizer batteries. The sales strateg3, called for displaying the floor stands for the two brands side &, side in retail outlets. In explaining the rationale underlying the promotion, a marketing executive of the Gillette Company noted that, because the retail display risers for the two brands are identical, joint display enlaances the prospects that both items will be purchased hy c o n s u nlers.'-'
9. A c c e s s to n e w c u s t o m e r groups. A joint sales promotion offered a tube of Aim toothpaste free on purchase of one 100-tablet box of Anacin and a tube of Aim toothpaste. Children constitute the primary customer base for Aim, while adults constitute tim primary customer base for Anacin. This joint promotion may have been an attempt by Aim to increase its penetration of the adult market. I0. A c c e s s to the image and market s t a n d i n g o f established brands. A complementary relationship between participating brands is not a prerequisite for joint sales promotions. Newly introduced brands with limited market share can benefit by association with well-established brands in directly noncompeting product categories with a broad constlmer base. Such association can enhance the image of the new brand and lower the risk consumers perceive in trying new 2. Marketing News, April 1, 1983: 2.
brands. O f course well-established brands have to be cautious about such programs. They need to refi'ain from participation if there is any risk that their image will be affected aclversely by association with certain brands, product categories, or filmas. These ten categories constitute only a partial listing of potential opportu.nities for joint sales promotion. Numerous other joint sales promotions have capitalized on d e r i v e d d e m a n d relationship (Mattel battery-powered toys and Duracell batteries), market leadership status (Vaseline, the number one intensive care lotion, and Listerine, the nt, mber one mouthwash), national and international s p o r t i n g e v e n t s (Super Bowl, Olympics), religious holidays (Christmas), national holidays (Independence Day, Thanksgiving), and so forth. In addition, a number of firms have initiated joint sales promotions as a defensive c o u n t e r m e a s u r e to neutralize the effects of competitors' actions. During 1982, for example, Kodak is reported to have initiated a joint sales promotion with Eastern Airlines in response to a similar program that Polaroid initiated with Delta Airlines. In certain cases, a firm realistically can establish multiple tie-in relationships with a number of manufacturers of a complementary product or sever/al complementary products. For example, Tide detergent has had arrangements with several manufacturers of washing machines. Tide featured their washing machines in its advertisements and supplied them with cents-off store coupons and/or
samples of detergent to be given free with the washing machines. Coffeemate nondairy creamer has had numerous joint sales promotion programs with complementary products such as instant coffee, ground coffee, automatic coffeemakers, coffeemaker filters, breakfast cereals, and so forth. T h e Practice o f Joint Sales P r o m o t i o n
n view of the growing importance of joint sales promotion as an integral component of brand marketing strategy, especially for packaged consumer products, a survey was conducted to gain additional insights into the practice of joint sales promotion. A m o n g the issties addressed in the survey were: • Major considerations underlying participation; • Consumer and trade sales objectives that firms strive to reach by participating in joint promotions; • Criteria firms use to screen potential partners at the company, product class, and brand level; • Problems and risks associated with joint promotions; • Lead-time requirements for planning; • Prevalence of policy guidelines at the corporate and functional level that pertain to joint sales promotions; • Personnel involved in planning and implementation; and • Scope of the terms of agreement between the partners. In-depth telephone interviews were held with seven top-level sales pro-
I
46
motion executives, and written responses were provided by three toplevel executives to a series of 20 openended questions on joint sales promotions. Seven of the ten executives surveyed held the title of Director of Sa!es Promotion. Two of the ten respondents worked for the same company-one at the corporate headquarters and the other in a major division of the company. The interviews were conducted in December 1983 and January 1984. The duration of telephone interviews ranged from 30 to 90 minutes. The executives surveyed were with the following companies: Campbell Soup, Carnation, Coca-Cola, Dart & Kraft, Kimberly-Clark, Lever Brothers, Pepsico, Pillsbury, and. Sara Lee. These companies all use many varied forms of cooperative sales promotion. In view of the small sample size, no attempts ar~ made to quantify the results of this study.
Participation in Joint Sales Promotions: Underlying Considerations
Efficiency and effectiveness appear to be the dominant considerations underlying the participation of firms in joint sales promotions. Cost efficiency results from sharing media costs and other sales promotion costs. In certain situations, brands participating in j o i n t sales promotions can realize specified sales and communication objectives at a lower cost than if they used brand specific sales promotion. It also may be possible for a firm to get the most out of a specified level of sales promotion effort by pooling resources in a joint sales promotion. Executives attributed greater promotion effectiveness to a number of factors: (1) The larger financial outlay generally associated with joint sales promotions; (2) The larger financial incentives
generally offered to consumers and the trade; (3) The collective effort of the sales forces r e p r e s e n t i n g participating brands in enlisting trade participation and cooperation; (4) T h e increased leverage with trade to gain additional shelf space and joint display o f participating brands; and (5) The ability to afford such promotion effectiveness enhancers as point-of-purchase, end-of-aisle, and joint displays, which a single brand by itself may be unable to afford.
Consumer and Trade Sales Promotion Objectives Firms work toward realizing diverse consumer and trade sales promotion objectives. As reasons for their participation in joint promotions, most respondents stated consumer sales promotion objectives in broad terms, such
//
"You may inform the agency that Gurble's fine premium beer will have remedy/"
no
part of
any
joint sales promotion with
any
headache
Joint Sales Promotion: An Emerging Marketing Tool
as increasing sales, increasing general consumer awareness of participating brands, increasing consumer exposure to participating brands at the retail level, stimulating impulse and multiple unit purchases, and promoting accelerated purchases. More specific statements of objectives include promoting new uses, stimulating use o f an established product in new combinations, stimulating trial purchases of an established product by customer groups who presently do not use the product, broadening the brand's user base, and stimulating trial purchases for a new product. The major trade sales promotion objectives identified by firms participating in joint sales promotions were to:
• Increase sales to trade. • Gain broad-scale trade merchandising support in the form of special displays, joint displays, price promotions, and featuring of participating brands in retailer advertisements. • Increase brand visibility in present channels of distribution by promoting display at multiple locations. This objective is illustrated by the case of two brands, A and B, with strong shelf e x p o s u r e in the household product section and the beauty aids section, respectively. One of the objectives underlying a joint promotion between these two brands was to gain additional shelf exposure for both brands in the form of joint displays at both locations. This joint display was part of a broader effort to gain permanent display space for brand A in the beauty aids section and for brand B in the household products section, in addition to their present locations. • Gain access to new channels of distribution and/or enhance distribution intensity and sales in present channels of distribution. One joint promotion involved two brands in noncompeting product categories with different corporate affiliations. Brand X was in a strong position in drug stores and a weak position in food stores, while brand Y's position was exactly the reverse. One of the objectives underlying the joint sales promotion was to improve the distribution intensity and market position of brand
X in food stores and brand Y in drug stores. Screening Joint Promotion Programs and Participants The screening process tends to have two distinct components: (1) Screening the proposed program on its own merits; and (2) Screening the tie-in participants. Some of the criteria firms employ include: • Consistency of p r o p o s e d joint sales promotion with the overall sales and communication objectives of the brand; • Likely consumer and trade response; • Compatibility between the proposed tie-in brands in regard to promotion objectives, timing of promotion, planned level of tie-in promotion expenditure, and so forth; • Market standing of the proposed tie-in brands in terms of level of consumer awareness, brand image, and market share; • Current levels of distribution intensity at the retail level of proposed tie-in brands; • Relationship and leverage with trade and the quality of sales forces representing potential tie-in brands; and • The firm's past experience in previous joint sales promotions involving the same brands or firm. Problems and Risks Associated with Joint Sales Promotions Although joint sales promotions offer the twin benefits of efficiency and effectiveness and are uniquely suited for achieving certain promotional objectives, nevertheless a number of problems and risks tend to be associated with them. Some of the majorproblems encountered by firms in planning and implementing joint sales promotions include: • Delays encountered in gaining appro'val of the proposed program from all participating companies; • M a n u f a c t u r i n g and logistical problems resulting in sporadic shortages (at the retail level) of one or more of the participating brands;
• Problems encountered in coordinating the activities of the sales forces r e p r e s e n t i n g participating brands and in scheduling joint sales presentations by the sales forces to the retail chain buyers; • Tendency to blame the personnel representing the other company when problems are encountered; and • Conflict of interest at the food broker level, a problem unique to firms employing food brokers as their intermediaries. A somewhat similar predicament arises when different potential tie-in brands tend to be the leading brands in different regions. Some firms have overcome this problem by regionalizing their joint sales promotions and their choice of tie-in partners. Major risks associated with joint sales promotion include: 1. Withdrawal by one of the participants at the last minute. Budgetary problems, changes in objectives, manufacturing-related problems, or other unforeseen developments all can lead to a firm's backing out of a planned joint sales promotion at the last minute. For example, a joint sales promotion involving a leading brand of frozen cake and frozen orange juice concentrate had to be called off when a hard winter extensively damaged the citrus crop. 2. Possible litigation. Though not unique to joint sales promotion, there is the risk of a lawsuit. In 1982, for instance, the New York State Attorney General charged that Kodak and Eastern Airlines used deceptive advertising in a joint advertising and sales promotion campaign? 3. Dilution of brand image. The expectation is that the stature of weaker brands will be enhanced in the minds of the consumer as a result of association with well-established brands. The risk is that the stature of the well-established brand will be lowered in the minds of consumers as a result o f association with weaker brands. 4. M i x e d o u t c o m e s . Sometimes only one of the brands benefits from participating in a joint sales promdtion. The reason may be selective con3. Wall Street Journal, December 28, 1982: 21.
47
sumer or trade response, or it may be the superior, focused efforts of the sales force representing one of the participating brands. Lead-Time Requirements for Joint Sales Promotion
48
S u p e r m a r k e t chains generally develop their weekly promotion plans eight to ten weeks ahead of time, when they decide on main feature items for the week, in-store price specials, endof-aisle displays, and brands to be featured in the best food day advertisements. T h e r e f o r e , m a n u f a c t u r e r s need to plan their joint sales presentations to the trade at least three months ahead of the scheduled retail impact date. Negotiation with tie-in partners, development of the promotional material, and approval by concerned personnel in participating firms may require four to six months of additional lead time. Hence, tie-in promotions usually require a lead time of from six to nine months. Prevalence of Policy Guidelines The firms surveyed generally lacked written policy guidelines pertaining to joint sales promotions. Given the widespread use of such promotions, this oversight is somewhat surprising and a matter of concern. However, unwritten policies are widely prevalent. Brand managers usually are not permitted to enter into joint sales promotions with firms who are competitors in other productmarket domains. For instance, although brand X instant coffee and brand Y coffee creamer, made by two different firms, may constitute an ideal tie-in, if these firms are formidable competitors in the pet food business, they may not enter into a joint promotion. However, some firms do not adhere to such restrictions. A leading brand of instant coffee and a leading coffee creamer participated in a tiein promotion, although in the powdered drink mix business these firms are direct competitors. Personnel Involved in the Planning and Implementation of Joint Sales Promotions
The personnel most often involved in joint sales promotions related decisions are the sales promotion manager, the brand manager, the group product manager, the sales manager, the merchandising manager, legal advisors, and financial analysts. In most cases the brand manager or the sales promotion manager initiates the program. Together, the two shoulder much of the work involved in planning and implementing joint sales promotions. Scope of Terms of Agreement Between Joint Promotions Partners What areas generally are covered in that legally binding clocument known as the terms of agreement? Such documents usually include: • Initial terms of agreement; • Renewal terms of agreelnent; • Promotion program details (objectives, participating brands, theme, budget, timing and duration of promotion, and so forth); • Sharing of fixed and variable promotion costs; • Division of duties and responsibilities (for example, assignment of responsibility tbr development and distribution of promotion s u p p o r t materials); • Procedure fox" resolt, tion of claims, dalnages, and unanticipated expenses arising out of program implementation; • Provisions guiding use of trademarks and brand nalnes in each other's advertising and sales promotion programs; and • Exclusive-nonexclusive clause (under the nonexclusive clause, either party is free to engage in similar promotions in association with other companies). Firms generally require that their legal d e p a r t m e n t s review and approve the terms of agreement for joint sales promotions prior to program -implementation. The Future of Joint Sales Promotion n recent years sales promotion has grown steadily more important as an integral part of brand marketing strategy. Current trends
I
indicate that firms, especially marketers of frequently purchased consumer nondurable goods, participate extensively in joint sales promotion programs. However, many firms seem to use joint sales promotion to achieve short-term sales objectives and overlook its potential as a tool fox"achieving long-term communication objectives: Against this backdrop, it is encouraging to note that some firms have successfully augmented joint advertising with joint sales promotion. Such creative linkage of brancls pax-ticipating in joint sales promotion programs appears to have resulted in "positive learning" and/or "attitude change" among consumers. A case in point: A joint advertising and sales promotion campaign involving Dannon yogurt and Post Grapenut cereals, designed to promote a new joint use (intended positive learning: try Post Grapenut brand cereal mixed with Dannon brand yogurt), has been running for more than five years. The use of joint sales promotion as a strategic marketing tool and the underlying considerations are illustrated by a case history fi'om the frozen foods industry. A leading fi'ozen food manufacturer tends to view joint sales promotions as an effective tool to compete for a larger share of the consumers' total food dollars. The theme underlying this company's joint sales promotions has been to promote in-home fbocl consumption as an economical, convenient, nutritionally superior alternative to eating at restaurants and fast food chains. The firm views joint promotions as a significant d e p a r t u r e from individual product marketing to total concept marketing and consumer problem solving. Presenting the consumer with a welldeveloped meal concept is viewed by this firm as a way of providing a solution to the consumer's menu planning problem. The following tie-in promotions involving fi'ozen foods illustrate this viewpoint: • Brand X fi'ied chicken, brand Y french fries, brand Z corn on the col); • Brand X fish fillets, brand Y french fries, brand Z orange juice concentrate; 4. Roger Strang, "File Promotional Planning Process (New York: Pragcr, 1980).
Joint Sales Promotion: An Emerging Marketing Tool
• Brand X pizza, brancl Y cake, and A Framework for Managing Joint Sales Promotions brand Z orange juice concentrate. The tie-in promotion participants IDENTIFY potential opportunities for joint sales promote these meal concepts as ecopromotion. nomical alternatives to dining out at DEFINE the role of joint sales promotion within the chicken, seafood, and pizza restau- Analysis broader domains of the sales promotion rants. Leading fi'ozen foods manumix. facturers see such prontotions as a means to present viable solutions to SCREEN potential joint sales promotion participants. the menu-planning problem faced by the consumer, in addition to offering DEVELOP ahernative joint promotion concepts and short-term economic incentives that tentative programs (size of incentive, are known to increase a brand's shortconditions for participation, distribution vehicle for promotion, duration of term sales. promotion, timing of promotion, tentative One manufacturer speculates that budget, etc,). independent promotions run the risk of EVALUATE fo)ward buying and invento U accumuahernative joint promotion programs and pertorm preliminary cost-benefit analysis. lation by the consumer. On the other hand, a joint advertising and sales pro- Planning EXPLORE interest in the promotion concept and motion program designed to address program among potential participants. the consumer's problem of planning PRETEST promotion concept if necessary. the dinner for this week is likely to REFINE a detailed program in consuhation with p r o m o t e immediate consumption & DEVELOP other potential program participants. rather than forward buying and i6ventory accumulation) NEGOTIATE terms and conditions of participation in the Among the factors that retail manproposed program. agers evaluate in selecting brands is GAIN of proposed program from tim the overall strength of a manufacturAPPROVAL managements of participating er's promotional program. '~ Thus, organizations. when retailer assortment, promotional, or advertising strategies are I MPLEIVlENT the program. being decided, merchandisers tend to MONITOR the progress and perlormance of the choose those brands with attractive program. manufacturer support progTams such Implementation as brand-specific, intra- and interMODI FY the program during midcourse if required company cooperative sales promo- and Control tions, and cooperative advertising. EVALUATE tim performance of the joint sales Therefore, firms need to explore the pronlotion. strategic role of joint sales promotions in maintaining a favorable position in the retailer's long-term merchanclisT oint sales promotioi~s undeniably ties to brand-specific sales promoing mix. The Figure provides a gen|entail additional ~ot'k in plan- tions. Efficiency and effectiveness should eral framework ['or managing joint • | ning and implementation. It is a be the major considerations in choossales promotions. ~ J protracted process to negotiate ing between alternative sales promowith prospective participants the terms tion tools. For many brands, joint sales 5. Gene Pfister, "Sales Gain Advocated of participation and then implement promotion may be the most efficient Through Meal Concept, Other Promotions," Marketing NeTvs, October 28, 1983: 13. the promotion. However, managers and most effective alternative. [] 6. Robert F. Young and St/el)hen A. Greyser, should not refrain from participating Cooperative Advertising: Practices and Probh'ms (Cambridge, Mass.: Marketing Science Insti- in joint promotions for this reason, nor should they confine their activitute, 1982).
49
Emerging Marketing Tool
P. Rajan Varadarajan 43 P. Rajan Varadarajan is an assistant professor of marketing in the College of Business Administration at Texas A&M University.
Promoting your product jointly with another company's product may help your firm realize certain marketing goals.
C
onsider a few of the sales promotions in the U.S. consumer market in the last couple of
years. • Cents-off manufacturers' coupons redeemable on purchase of Dannon yogurt and Post Grapenut cereals. • A four-dollar cash and coupon refund offer on purchase of Minute Maid frozen orange juice concentrate, Ore Ida frozen hash brown potatoes, and Sara Lee frozen cake. • A free mail-in premium offer of Eveready lanterns on purchase of Good News disposable razors and Energizer batteries. • A free in-pack premium offer of Fisher dry roasted peanuts in cartons of Golden Grahams cereal. Although these promotions are marketing d i f f e r e n t products employing d i f f e r e n t sales promotion tools, all four promotions have one common trait. The brands participating in each of these promotions are manufactured by different companies. This phenomenon, commonly referred to as intercompany cooperative sales promotion, joint sales promotion, or tie-hi sales promotion, has been gaining momentum in recent years. ~
This article provides an overview of joint sales promotion. The first section outlines opportunities for sales and profit growth through joint sales promotion. The second section presents the results of a small survey on current practices, procedures, and policies pertaining to joint sales promotion. The final section is a brief discussion on the future of joint sales promotion. Potential Opportunities for Joint Sales Promotion
n a joint sales promotion, two or more distinct brand entities from different companies pool their promotional resources to capitalize on joint opportunities for sales growth and profits, or to realize other objectives. What characteristics make joint sales promotion possible? 1. Natural use complementary relationships. Joint sales promotions have been used extensively by firms to capitalize on complementary relationships in the natural use of certain products. For example, Reach toothbrush, a product of Johnson & Johnson, and Aqua-fresh toothpaste, a product of Beecham Inc., have been partners in numerous joint sales pro1. The terms intercompa~Lvcooperative sales promotion, joint sales promotion, and tie-in sales motion programs in recent years. promotion are used interchangeablyin this ar- Warner-Lambert Company and S. C. ticle. Johnson and Son, Inc., have been in-
I
Business Horizons / September-Oclol~er198.5
44
volved in joint promotion of Schick shaving cartridges and Edge shaving gel. Understandably, when the same firm manufactures two or more complementary products, it is likely to opt for an intracompany (umbrella) rather than an intercompany O'oint) sales promotion. A case in point: a sales promotion built around the Gillette Atra razor and Gillette Foamy shaving cream.
pantyhose. Two 50 cents-off store coupons, one for Diet Pepsi and the other for Pepsi Light, were inserted in five million packages of No Nonsense pantyhose. In addition, consumers were o f f e r e d a chance to obtain by mail a fi'ee pack of No Nonsense pantyhose in exchange for proofs of purchase of Diet Pepsi and Pepsi Light.
2. Newly created complementary relationships. Innovative firms con-
Products or services that together serve to satisfy a broader consumer need can be promoted jointly. Think of the possibilities inherent in the process of traveling to a particular vacation spot. We can hypothesize a promotion that proclaims, "Fly by Eastern Airlines! Rent an Avis Car! Stay at the Holiday lnn! Visit Walt Disney World/Epcot Center at Orlando, Florida! Just use your Ameri-
stanfly are engaged in identifying new uses for their products, which leads to creating complementary relationships. Joint sales promotion is one of the most effective means to help consumers learn about new uses for a product. For ,example, in order to promote the use of vinegar for periodic cleaning of automatic coffeemakers, H. J. Heinz C o m p a n y periodically inserts cents-off coupons for its vinegar in cartons of Mr. Coffee coffeemakers and filters. Manufacturers of breakfast cereals have long focused on promoting new uses, especially the use of cereals during other times of the day. General Foods Corporation, for example, actively promotes consumption of its Post Grapenut cereal mixed with yogurt, any time of the day. Dannon yogurt has been its partner in this sales promotion program for more than five years.
5. Process
complementarity.
can Express credit card to pay for all of the above, and get 20 percent off regular prices!"
6. Target market commonality. A joint sales promotion may be the ideal marketing tool to reach a particular target market that uses a number of noncompeting products. A case in point is a promotion that involves three products targeted at the children's market--Aim toothpaste, St. Joseph's aspirin, and Flintstone chewable vitamin tablets. 7. Seasonal demand patterns. Tylenol acetaminophen and Kleenex facial tissues have been jointly promoted on a number of occasions during the cold-flu season (the winter months), when use of both products reaches a high. Likewise, Reynolds Wrap, Hi-C fruit-flavored drink, and Kingsford charcoal are promoted jointly during
3. Use time complementarity. M a n u f a c t u r e r s of products commonly consumed at the breakfast table---cereals, orange.juice, pancakes, coffee, and so forth---often team together in sales promotions. Nabisco Inc., Nestle Company Inc., and the American Dairy Association jointly promote Nabisco Oreo cookies and Nestle Quik chocolate drink mix (dissolved in milk) as an ideal afternoon snack for children returning from school. Another illustration is a dinner-time meal concept built around Totino's frozen pizza, Sara Lee frozen cake, and Minute Maid fi'ozen orange juice concentrate. 4. Image complementarity, hnage rather than use can be the theme underlying a joint sales promotion program. A case in point is the joint sales promotion of Diet Pepsi and Pepsi Light soft drinks and No Nonsense
"Now, by mailing in your proof of purchase and the coupon attached to the mouthwash, you can get a substantial reduction on a swinging singles weekend package in Las Vegas."
Joint Sales Promotion: An Emerging Marketing Tool
"Newly introduced brands with limited market share can benefit by association with well-established brands in directly noncompeting product categories with a broad consumer base. Such association can enhance the image of the new brand and lower the risk consumers perceive in trying new brands." 45 the summer under the unifying theme "Summertime Cookout." 8. C o m m o n distribution patterns. In 1981, a major refund promotion tied together Gillette Good News disposable razors and Union Carbide Energizer batteries. The sales strateg3, called for displaying the floor stands for the two brands side &, side in retail outlets. In explaining the rationale underlying the promotion, a marketing executive of the Gillette Company noted that, because the retail display risers for the two brands are identical, joint display enlaances the prospects that both items will be purchased hy c o n s u nlers.'-'
9. A c c e s s to n e w c u s t o m e r groups. A joint sales promotion offered a tube of Aim toothpaste free on purchase of one 100-tablet box of Anacin and a tube of Aim toothpaste. Children constitute the primary customer base for Aim, while adults constitute tim primary customer base for Anacin. This joint promotion may have been an attempt by Aim to increase its penetration of the adult market. I0. A c c e s s to the image and market s t a n d i n g o f established brands. A complementary relationship between participating brands is not a prerequisite for joint sales promotions. Newly introduced brands with limited market share can benefit by association with well-established brands in directly noncompeting product categories with a broad constlmer base. Such association can enhance the image of the new brand and lower the risk consumers perceive in trying new 2. Marketing News, April 1, 1983: 2.
brands. O f course well-established brands have to be cautious about such programs. They need to refi'ain from participation if there is any risk that their image will be affected aclversely by association with certain brands, product categories, or filmas. These ten categories constitute only a partial listing of potential opportu.nities for joint sales promotion. Numerous other joint sales promotions have capitalized on d e r i v e d d e m a n d relationship (Mattel battery-powered toys and Duracell batteries), market leadership status (Vaseline, the number one intensive care lotion, and Listerine, the nt, mber one mouthwash), national and international s p o r t i n g e v e n t s (Super Bowl, Olympics), religious holidays (Christmas), national holidays (Independence Day, Thanksgiving), and so forth. In addition, a number of firms have initiated joint sales promotions as a defensive c o u n t e r m e a s u r e to neutralize the effects of competitors' actions. During 1982, for example, Kodak is reported to have initiated a joint sales promotion with Eastern Airlines in response to a similar program that Polaroid initiated with Delta Airlines. In certain cases, a firm realistically can establish multiple tie-in relationships with a number of manufacturers of a complementary product or sever/al complementary products. For example, Tide detergent has had arrangements with several manufacturers of washing machines. Tide featured their washing machines in its advertisements and supplied them with cents-off store coupons and/or
samples of detergent to be given free with the washing machines. Coffeemate nondairy creamer has had numerous joint sales promotion programs with complementary products such as instant coffee, ground coffee, automatic coffeemakers, coffeemaker filters, breakfast cereals, and so forth. T h e Practice o f Joint Sales P r o m o t i o n
n view of the growing importance of joint sales promotion as an integral component of brand marketing strategy, especially for packaged consumer products, a survey was conducted to gain additional insights into the practice of joint sales promotion. A m o n g the issties addressed in the survey were: • Major considerations underlying participation; • Consumer and trade sales objectives that firms strive to reach by participating in joint promotions; • Criteria firms use to screen potential partners at the company, product class, and brand level; • Problems and risks associated with joint promotions; • Lead-time requirements for planning; • Prevalence of policy guidelines at the corporate and functional level that pertain to joint sales promotions; • Personnel involved in planning and implementation; and • Scope of the terms of agreement between the partners. In-depth telephone interviews were held with seven top-level sales pro-
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motion executives, and written responses were provided by three toplevel executives to a series of 20 openended questions on joint sales promotions. Seven of the ten executives surveyed held the title of Director of Sa!es Promotion. Two of the ten respondents worked for the same company-one at the corporate headquarters and the other in a major division of the company. The interviews were conducted in December 1983 and January 1984. The duration of telephone interviews ranged from 30 to 90 minutes. The executives surveyed were with the following companies: Campbell Soup, Carnation, Coca-Cola, Dart & Kraft, Kimberly-Clark, Lever Brothers, Pepsico, Pillsbury, and. Sara Lee. These companies all use many varied forms of cooperative sales promotion. In view of the small sample size, no attempts ar~ made to quantify the results of this study.
Participation in Joint Sales Promotions: Underlying Considerations
Efficiency and effectiveness appear to be the dominant considerations underlying the participation of firms in joint sales promotions. Cost efficiency results from sharing media costs and other sales promotion costs. In certain situations, brands participating in j o i n t sales promotions can realize specified sales and communication objectives at a lower cost than if they used brand specific sales promotion. It also may be possible for a firm to get the most out of a specified level of sales promotion effort by pooling resources in a joint sales promotion. Executives attributed greater promotion effectiveness to a number of factors: (1) The larger financial outlay generally associated with joint sales promotions; (2) The larger financial incentives
generally offered to consumers and the trade; (3) The collective effort of the sales forces r e p r e s e n t i n g participating brands in enlisting trade participation and cooperation; (4) T h e increased leverage with trade to gain additional shelf space and joint display o f participating brands; and (5) The ability to afford such promotion effectiveness enhancers as point-of-purchase, end-of-aisle, and joint displays, which a single brand by itself may be unable to afford.
Consumer and Trade Sales Promotion Objectives Firms work toward realizing diverse consumer and trade sales promotion objectives. As reasons for their participation in joint promotions, most respondents stated consumer sales promotion objectives in broad terms, such
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Joint Sales Promotion: An Emerging Marketing Tool
as increasing sales, increasing general consumer awareness of participating brands, increasing consumer exposure to participating brands at the retail level, stimulating impulse and multiple unit purchases, and promoting accelerated purchases. More specific statements of objectives include promoting new uses, stimulating use o f an established product in new combinations, stimulating trial purchases of an established product by customer groups who presently do not use the product, broadening the brand's user base, and stimulating trial purchases for a new product. The major trade sales promotion objectives identified by firms participating in joint sales promotions were to:
• Increase sales to trade. • Gain broad-scale trade merchandising support in the form of special displays, joint displays, price promotions, and featuring of participating brands in retailer advertisements. • Increase brand visibility in present channels of distribution by promoting display at multiple locations. This objective is illustrated by the case of two brands, A and B, with strong shelf e x p o s u r e in the household product section and the beauty aids section, respectively. One of the objectives underlying a joint promotion between these two brands was to gain additional shelf exposure for both brands in the form of joint displays at both locations. This joint display was part of a broader effort to gain permanent display space for brand A in the beauty aids section and for brand B in the household products section, in addition to their present locations. • Gain access to new channels of distribution and/or enhance distribution intensity and sales in present channels of distribution. One joint promotion involved two brands in noncompeting product categories with different corporate affiliations. Brand X was in a strong position in drug stores and a weak position in food stores, while brand Y's position was exactly the reverse. One of the objectives underlying the joint sales promotion was to improve the distribution intensity and market position of brand
X in food stores and brand Y in drug stores. Screening Joint Promotion Programs and Participants The screening process tends to have two distinct components: (1) Screening the proposed program on its own merits; and (2) Screening the tie-in participants. Some of the criteria firms employ include: • Consistency of p r o p o s e d joint sales promotion with the overall sales and communication objectives of the brand; • Likely consumer and trade response; • Compatibility between the proposed tie-in brands in regard to promotion objectives, timing of promotion, planned level of tie-in promotion expenditure, and so forth; • Market standing of the proposed tie-in brands in terms of level of consumer awareness, brand image, and market share; • Current levels of distribution intensity at the retail level of proposed tie-in brands; • Relationship and leverage with trade and the quality of sales forces representing potential tie-in brands; and • The firm's past experience in previous joint sales promotions involving the same brands or firm. Problems and Risks Associated with Joint Sales Promotions Although joint sales promotions offer the twin benefits of efficiency and effectiveness and are uniquely suited for achieving certain promotional objectives, nevertheless a number of problems and risks tend to be associated with them. Some of the majorproblems encountered by firms in planning and implementing joint sales promotions include: • Delays encountered in gaining appro'val of the proposed program from all participating companies; • M a n u f a c t u r i n g and logistical problems resulting in sporadic shortages (at the retail level) of one or more of the participating brands;
• Problems encountered in coordinating the activities of the sales forces r e p r e s e n t i n g participating brands and in scheduling joint sales presentations by the sales forces to the retail chain buyers; • Tendency to blame the personnel representing the other company when problems are encountered; and • Conflict of interest at the food broker level, a problem unique to firms employing food brokers as their intermediaries. A somewhat similar predicament arises when different potential tie-in brands tend to be the leading brands in different regions. Some firms have overcome this problem by regionalizing their joint sales promotions and their choice of tie-in partners. Major risks associated with joint sales promotion include: 1. Withdrawal by one of the participants at the last minute. Budgetary problems, changes in objectives, manufacturing-related problems, or other unforeseen developments all can lead to a firm's backing out of a planned joint sales promotion at the last minute. For example, a joint sales promotion involving a leading brand of frozen cake and frozen orange juice concentrate had to be called off when a hard winter extensively damaged the citrus crop. 2. Possible litigation. Though not unique to joint sales promotion, there is the risk of a lawsuit. In 1982, for instance, the New York State Attorney General charged that Kodak and Eastern Airlines used deceptive advertising in a joint advertising and sales promotion campaign? 3. Dilution of brand image. The expectation is that the stature of weaker brands will be enhanced in the minds of the consumer as a result of association with well-established brands. The risk is that the stature of the well-established brand will be lowered in the minds of consumers as a result o f association with weaker brands. 4. M i x e d o u t c o m e s . Sometimes only one of the brands benefits from participating in a joint sales promdtion. The reason may be selective con3. Wall Street Journal, December 28, 1982: 21.
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sumer or trade response, or it may be the superior, focused efforts of the sales force representing one of the participating brands. Lead-Time Requirements for Joint Sales Promotion
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S u p e r m a r k e t chains generally develop their weekly promotion plans eight to ten weeks ahead of time, when they decide on main feature items for the week, in-store price specials, endof-aisle displays, and brands to be featured in the best food day advertisements. T h e r e f o r e , m a n u f a c t u r e r s need to plan their joint sales presentations to the trade at least three months ahead of the scheduled retail impact date. Negotiation with tie-in partners, development of the promotional material, and approval by concerned personnel in participating firms may require four to six months of additional lead time. Hence, tie-in promotions usually require a lead time of from six to nine months. Prevalence of Policy Guidelines The firms surveyed generally lacked written policy guidelines pertaining to joint sales promotions. Given the widespread use of such promotions, this oversight is somewhat surprising and a matter of concern. However, unwritten policies are widely prevalent. Brand managers usually are not permitted to enter into joint sales promotions with firms who are competitors in other productmarket domains. For instance, although brand X instant coffee and brand Y coffee creamer, made by two different firms, may constitute an ideal tie-in, if these firms are formidable competitors in the pet food business, they may not enter into a joint promotion. However, some firms do not adhere to such restrictions. A leading brand of instant coffee and a leading coffee creamer participated in a tiein promotion, although in the powdered drink mix business these firms are direct competitors. Personnel Involved in the Planning and Implementation of Joint Sales Promotions
The personnel most often involved in joint sales promotions related decisions are the sales promotion manager, the brand manager, the group product manager, the sales manager, the merchandising manager, legal advisors, and financial analysts. In most cases the brand manager or the sales promotion manager initiates the program. Together, the two shoulder much of the work involved in planning and implementing joint sales promotions. Scope of Terms of Agreement Between Joint Promotions Partners What areas generally are covered in that legally binding clocument known as the terms of agreement? Such documents usually include: • Initial terms of agreement; • Renewal terms of agreelnent; • Promotion program details (objectives, participating brands, theme, budget, timing and duration of promotion, and so forth); • Sharing of fixed and variable promotion costs; • Division of duties and responsibilities (for example, assignment of responsibility tbr development and distribution of promotion s u p p o r t materials); • Procedure fox" resolt, tion of claims, dalnages, and unanticipated expenses arising out of program implementation; • Provisions guiding use of trademarks and brand nalnes in each other's advertising and sales promotion programs; and • Exclusive-nonexclusive clause (under the nonexclusive clause, either party is free to engage in similar promotions in association with other companies). Firms generally require that their legal d e p a r t m e n t s review and approve the terms of agreement for joint sales promotions prior to program -implementation. The Future of Joint Sales Promotion n recent years sales promotion has grown steadily more important as an integral part of brand marketing strategy. Current trends
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indicate that firms, especially marketers of frequently purchased consumer nondurable goods, participate extensively in joint sales promotion programs. However, many firms seem to use joint sales promotion to achieve short-term sales objectives and overlook its potential as a tool fox"achieving long-term communication objectives: Against this backdrop, it is encouraging to note that some firms have successfully augmented joint advertising with joint sales promotion. Such creative linkage of brancls pax-ticipating in joint sales promotion programs appears to have resulted in "positive learning" and/or "attitude change" among consumers. A case in point: A joint advertising and sales promotion campaign involving Dannon yogurt and Post Grapenut cereals, designed to promote a new joint use (intended positive learning: try Post Grapenut brand cereal mixed with Dannon brand yogurt), has been running for more than five years. The use of joint sales promotion as a strategic marketing tool and the underlying considerations are illustrated by a case history fi'om the frozen foods industry. A leading fi'ozen food manufacturer tends to view joint sales promotions as an effective tool to compete for a larger share of the consumers' total food dollars. The theme underlying this company's joint sales promotions has been to promote in-home fbocl consumption as an economical, convenient, nutritionally superior alternative to eating at restaurants and fast food chains. The firm views joint promotions as a significant d e p a r t u r e from individual product marketing to total concept marketing and consumer problem solving. Presenting the consumer with a welldeveloped meal concept is viewed by this firm as a way of providing a solution to the consumer's menu planning problem. The following tie-in promotions involving fi'ozen foods illustrate this viewpoint: • Brand X fi'ied chicken, brand Y french fries, brand Z corn on the col); • Brand X fish fillets, brand Y french fries, brand Z orange juice concentrate; 4. Roger Strang, "File Promotional Planning Process (New York: Pragcr, 1980).
Joint Sales Promotion: An Emerging Marketing Tool
• Brand X pizza, brancl Y cake, and A Framework for Managing Joint Sales Promotions brand Z orange juice concentrate. The tie-in promotion participants IDENTIFY potential opportunities for joint sales promote these meal concepts as ecopromotion. nomical alternatives to dining out at DEFINE the role of joint sales promotion within the chicken, seafood, and pizza restau- Analysis broader domains of the sales promotion rants. Leading fi'ozen foods manumix. facturers see such prontotions as a means to present viable solutions to SCREEN potential joint sales promotion participants. the menu-planning problem faced by the consumer, in addition to offering DEVELOP ahernative joint promotion concepts and short-term economic incentives that tentative programs (size of incentive, are known to increase a brand's shortconditions for participation, distribution vehicle for promotion, duration of term sales. promotion, timing of promotion, tentative One manufacturer speculates that budget, etc,). independent promotions run the risk of EVALUATE fo)ward buying and invento U accumuahernative joint promotion programs and pertorm preliminary cost-benefit analysis. lation by the consumer. On the other hand, a joint advertising and sales pro- Planning EXPLORE interest in the promotion concept and motion program designed to address program among potential participants. the consumer's problem of planning PRETEST promotion concept if necessary. the dinner for this week is likely to REFINE a detailed program in consuhation with p r o m o t e immediate consumption & DEVELOP other potential program participants. rather than forward buying and i6ventory accumulation) NEGOTIATE terms and conditions of participation in the Among the factors that retail manproposed program. agers evaluate in selecting brands is GAIN of proposed program from tim the overall strength of a manufacturAPPROVAL managements of participating er's promotional program. '~ Thus, organizations. when retailer assortment, promotional, or advertising strategies are I MPLEIVlENT the program. being decided, merchandisers tend to MONITOR the progress and perlormance of the choose those brands with attractive program. manufacturer support progTams such Implementation as brand-specific, intra- and interMODI FY the program during midcourse if required company cooperative sales promo- and Control tions, and cooperative advertising. EVALUATE tim performance of the joint sales Therefore, firms need to explore the pronlotion. strategic role of joint sales promotions in maintaining a favorable position in the retailer's long-term merchanclisT oint sales promotioi~s undeniably ties to brand-specific sales promoing mix. The Figure provides a gen|entail additional ~ot'k in plan- tions. Efficiency and effectiveness should eral framework ['or managing joint • | ning and implementation. It is a be the major considerations in choossales promotions. ~ J protracted process to negotiate ing between alternative sales promowith prospective participants the terms tion tools. For many brands, joint sales 5. Gene Pfister, "Sales Gain Advocated of participation and then implement promotion may be the most efficient Through Meal Concept, Other Promotions," Marketing NeTvs, October 28, 1983: 13. the promotion. However, managers and most effective alternative. [] 6. Robert F. Young and St/el)hen A. Greyser, should not refrain from participating Cooperative Advertising: Practices and Probh'ms (Cambridge, Mass.: Marketing Science Insti- in joint promotions for this reason, nor should they confine their activitute, 1982).
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